Payment behaviour in the US automotive sector has been rather good over the past two years.

The US automotive sector is performing well, with new car sales approaching pre-recession levels. New car sales are expected to increase 3.7% in 2015, to 17 million units, driven by robust economic performance, improved consumer confidence and expanded regulatory requirements for safety and fuel economy. The aftermarket segment remains stable, aided by lower fuel prices.

Gross margins of automotive businesses are expected to remain stable in the coming months as the industry benefits from lower raw material prices (on average raw materials account for 20% to 25% of a car's selling price). However, at the same time there is some headwind from a stronger USD.

The US automotive market is very competitve, with domestic brands such as GM, Ford and Fiat Chrysler losing market share to foreign producers from Japan and Germany. That said, The 'Detroit 3' remain the largest players in North America, and the industry remains competitive due to changing technology and regulatory requirements.

Automotive businesses tend to be highly leveraged, since the sector is very capital-intensive. Access to external funding has steadily improved since the 2008 credit crisis, due to the improved trading conditions within the sector, relaxation within the traditional credit markets and access to funding via government-backed programs.

The average payment duration in the US automotive industry is 30-60 days. Payment behaviour in this sector has been rather good over the past two years. The number of protracted payments, non-payments and insolvency cases is low. Given the positive performance outlook we expect the current insolvency rate to remain stable.

Due to the generally benign indicators we assess the credit risk and business performance of the automotive sector to be good, and our underwriting stance continues to be open.

However, we have generally a neutral underwriting stance on the alternative fuel vehicles segment, which is currently impacted by low oil prices and lack of infrastructure/charging points.